What is DeepTech and why is it going to save the world?
Pierre Mauries – Founder, General Partner, Chief Investment Officer, Nemesis Technologies
Firstly, let’s start at the beginning. What is DeepTech?
DeepTech, are typically startup companies that fundamentally focus on hard tech (not software) solutions with a specific and desired objective of providing solutions based on significant scientific challenges, such as biotechnology to solve genetic illnesses or engineering challenges and climate change solutions like carbon capture technology.
In 2011, Marc Andreessen famously wrote that “software is eating the world,” predicting that software companies would disrupt nearly every industry. His prescient projection has held true over the past decade. Software has had a widespread impact, ushering in dramatic efficiencies in business, transforming healthcare, and introducing countless conveniences into our daily lives.
However, while software has provided undeniable benefits, it alone is not a panacea for society’s biggest challenges, including the potentially the largest of all: The current climate crisis. Software alone will never solve the myriad of issues contributing to the dire state of our planet.
Hardware solutions and engineering-led innovations in the deeptech space will enable some of the most significant climate action.
For deeptech solutions to succeed and go beyond software applications, the industry will bring together advanced solutions such as Applied AI & Machine Learning, Quantum Computing, and Advanced Hardware – to solve the world’s most pressing and needed issues. Nemesis Technologies will be the first to invest in the most promising early-stage deeptech companies with pioneering impact across three key sectors: Climate, Network Infrastructure & Connectivity, and BioPharma.
The most exciting aspect of today’s deeptech innovations is that they are no longer science fiction or research experiments.
Many of the most earth-changing climate solutions are close to commercialization.
Dispelling deep tech myths
We must also address some deep-lying deeptech myths along the way. The first is that you can’t build large companies in deep tech. Based on the last decade, many believe that unicorns and 10X exits can only be found in software. To help illustrate how this is simply false, the team at Nemesis recently compiled a list of deep tech companies that have passed $1 billion in valuation and found about 120 recent unicorns in deep tech with a combined value of $463 billion. That’s right, nearly half a trillion dollars of value has already been created in deep tech.
Another myth is that deeptech companies require loads of capital and take forever to become large assets. To help bust this myth, our team analyzed the recent deeptech unicorns to understand how much money they took to get to unicorn valuation. The results reinforced what we knew from our experience: that deep tech startups’ capital and time requirements are on par with those of other sectors. In fact, the median deeptech unicorn took $115 million of capital and 5.2 years to get there.
Gorilla vs Unicorn deeptechstartup
However, we’ve got to remember that it’s not all about just a valuation – particularly within deeptech. Nemesis is looking much more at those potential gorilla companies that are focused on generating revenues and positive cashflow. This is not a WeWork moment. Gorilla companies are impressive, with a surpassed valuation of more than $1B and has a net annual revenue of more than $100M. Even though there are many more unicorns to gorillas –where mythical meets one of the largest great creatures on earth, Nemesis will be hunting down and protecting the gorilla.
Deeptech growth
The deeptech sector has seen impressive growth over the last few years, with global investment in the space quadrupling in recent years, rising from $15 billion in 2016 to $60 billion in 2020. But with today’s large and complex challenges, there will likely be plenty of upsides ahead for deeptech in addressing society’s most pressing issue — regardless of whether the economy is booming or slowing.
There is no question that hardware investing carries a very different risk profile than software investing. And of course, there is still immense value in software startups. But the scales are tipping. So much of technology operates on a pendulum, and that is now tilting steadily back towards a world with much more balanced returns for hardware.